Sri Lanka scores low in budget openness

Sri Lanka’s budget openness, in the latest global survey, scored 44 out of 100, coming next to last in South Asia, tied with Pakistan. The latest Open Budget Survey released worldwide last week, scores 115 countries on the openness of their budget process. The survey is conducted every two years. The recent assessments of the 2013/14 and 2016/17 budget processes placed Sri Lanka 60th in the world and amongst the lowest ranked countries in South Asia.

Verité Research Executive Director Dr. Nishan de Mel explaining the influence of trade openness on economic growth via budget balances said that in the latest assessment, compared to the previous, Sri Lanka improved in the information provided each quarter, on revenue, expenditure and debt.

However, in the quality and timeliness of this information, Sri Lanka continued to fall short of many of its peers, he said.

SL needs higher standards

The open budget survey (OBS) is the world’s only independent assessment of information disclosure in public budgets. The recent assessments of the 2013/14 and 2016/17 budget processes have placed Sri Lanka 60th in the world and amongst the lowest ranked countries in South Asia.

In the latest survey, of the 2016/17 budget process, Sri Lanka scored 44 out of 100, coming in next to last in South Asia, tied with Pakistan. Afghanistan performed better than Sri Lanka, whereas Bangladesh did not, Verité Research revealed.

Assistant Analyst Nilangika Fernando said that the Open Budget Survey evaluates countries on three elements. “It looks at the disclosure of budget documents, budget oversight and public participation in budget formulations and amendments to the budget. Countries are given a score out of hundred and they are then ranked.”

Sri Lanka’s budget related reporting is governed by the Fiscal Management (Responsibility) Act (No. 3 of 2003). The government remains compliant with this law, despite falling short of international standards on the quality and scope of its budget reports.

De Mel said that we have seen from the past that Sri Lanka is capable of doing much better.

“The survey shows that Sri Lanka has improved. But when it comes to public participation, Sri Lanka lags behind all other countries except Pakistan, taking our region into consideration,” he said.

He further noted that budget oversight at Parliament level is seen to be weak because Parliament does not play a role in the formulation of the budget.

“Similarly Sri Lanka does not publish a simplified ‘citizens budget’ that enables members of the public to understand policies within the budget,” he said.

Even though Sri Lanka has a Fiscal Management Responsibility Act, details are released in convoluted formats that are impossible to compare and understand by the average person. The government also retains significant discretionary power in allocating funds, especially for development activities under the National Budget Department.

“Implementation misses the spirit of the Act,” Dr. de Mel said. “One of the main purposes of the Act is to increase public awareness of the government’s fiscal policy and to establish standards for evaluating the government’s conduct of its fiscal strategy. To achieve this, the Act requires the publication of the budget speech and the draft budget estimates, which are provided to Parliament. But neither of these achieves the expected outcome of being a comprehensible and adequate overview of the budget.”

Verité Research emphasized the importance of publishing a comprehensible, non-technical budget document which is also known as a citizen’s budget.

The draft estimates are difficult to comprehend, spanning three volumes of about 500 pages each; and the budget speech focuses mainly on new expenditure proposals that cover less than 10 percent of the budgeted expenditure, leaving the rest opaque.

De Mel insisted on the need to provide budget related reports in a consistent format.

“The reports should monitor the progress of budgetary outcomes and help decipher deviations. Towards that end, the government conforms to the law by publishing the required documents,” he said.

However, the documents are in different formats with different levels of detail thus undermining the purpose of the Act.

“For example, the budget estimates and appropriation bill present values under the administrative units and ministries. However, the mid-year fiscal position report and the fiscal management report do not include a breakdown of the administrative units,” he said.

In the meantime, Verité Research highlighted the importance of publishing adequate information, in line with international standards.

The Act falls short in its requirements, said De Mel, explaining that the act requires the government to publish a mid-year fiscal position report that covers the first four months of the year and a second report that covers up to eight months of the year.

“But there is no report that covers the full year in the same format.

This undermines comparability and scrutiny of the budget information. Neither does the Act require periodic updates of the budget or audit reports, which are integral to meeting international standards,” he said. In past years Sri Lanka has performed better than in recent years, which points towards several of the above improvements being well within the scope of what is achievable in a short time-frame.

Recommendations

Improving Sri Lanka’s performance in budget openness requires alignment with international standards and requires the government to make two shifts: firstly, to go beyond the letter of the law and publish timely budget information in consistent formats. De Mel noted that the goal should be to enhance comprehensibility and comparability across documents. Secondly, to recognize the gaps in terms of budget information required by the law and publish adequate information that allows for the proper monitoring and scrutiny of budgetary outcomes and compliance.

He added that there are three simple ways in which Sri Lanka can improve, by going beyond the letter of the law and implementing the Act in terms of its intended purpose.

He emphasized that Sri Lanka should prioritize some actions to improve budget transparency.

Verité Research observed that a pre-budget report and an audit report have to be published online, citizen’s budget and a mid-year review should be published and there should be detailed data on the financial position of the government and increased information on performance and policy in the executive’s budget proposal. De Mel said that Sri Lanka also should focus on improving public participation in its budget process.

“There should be mechanisms for members of the public and executive branch officials to exchange views on national budget matters during the monitoring of the implementation of the national budget. These mechanisms could build on innovations, such as participatory budgeting and social audits,” he said.

He further noted that there should be legislative hearing on the formulation of the annual budget, during which members of the public or civil society organizations can testify. “Establish formal mechanisms for the public to assist the supreme audit institution in formulating its audit programme and to participate in relevant audit investigations,” he added.

The appetite for budget accountability has increased since the 2018 budget was presented to Parliament. Sri Lanka has legislation in place that allows for public scrutiny of budget information. But the shortfalls in implementation and the gaps in the requirements specified are resulting in the country coming out in poor light in international rankings on budget openness. In addition, the Ministry of Finance this year established a Budget Implementation Unit to oversee and monitor the implementation of the proposals in the 2018 Budget - whether they are successful remains to be seen.

Sri Lanka has legislation in place that allows for public scrutiny of budget information.

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